Prof. Ronald Colombo in Law360

Though Bank of America insists that the dollar rolls had no material effect on any of its statements to investors or the public, the size of the transactions suggests that claim might not hold up, according to Ron Colombo, a professor at Hofstra Law School.

“If these numbers are truly material to the bottom line of Bank of America, then there’s some real potential liability,” he said.

“The practice of dollar rolling is not illegal,” Colombo said. “That’s not the problem. The problem is if this dollar rolling causes Bank of America’s books or records or communications with shareholders or the public to be inaccurate. If any of those reports, communications, etc., were materially misleading because of the dollar rolling, then you’d have a potential Rule 10(b)5 violation,” he said.